Report: Consumers unhappy, but still buying
New research shows consumer sentiment declined over the same time period that retail spending picked up, painting a picture of people shopping through gritted teeth.
“Strengthening employment outcomes are providing the basis for spending to lift, including a rebound in full time jobs growth and continued wealth gains from housing,” said David Rumbens, Deloitte Access Economics partner. “But consumers aren’t happy.”
In the latest Retail Forecasts report, Deloitte Access Economics found jobs growth was driving Australians to spend more at checkout, but stagnant wages and underemployment left shoppers concerned about finances.
“Despite improvements in unemployment expectations and an increase in business confidence, consumer sentiment is at a low point with concerns over financial risks,” Rumbens said.
“And in the face of oncoming competition from the likes of Amazon, widespread aggressive discounting to lure in the consumer dollar, and rising energy prices, it’s likely retailers aren’t so happy either.”
Full-time jobs rose by 1.9 per cent between December 2016 and July 2017, while part-time jobs grew by 1.3 per cent. This is a substantial turnaround when compared with 2016, during which the absolute number of full-time jobs declined.
However, at around a third of total employment, the proportion of part-time jobs is still high, contributing to significant underemployment. The underemployment rate is now 9.3 per cent, which means almost one-tenth of workers would prefer more hours of work than they currently have.
Real retail turnover over the June quarter was 1.5 per cent, which is the highest real growth result since the March quarter in 2013, according to the report.
Nominal retail spending growth was 3.6 per cent for the year to June 2017, and Rumbens said he expects it to remain steady at that rate during the year ahead.
However, future spending growth may come more from volume growth, than price growth, with prices increasingly under pressure.
According to Deloitte, retail volumes grew 2.5 per cent in the year to June 2017 and are expected to rise to 3.4 per cent for the year to June 2018.
Meanwhile, prices grew at just 1 per cent over the year to June 2017, due to intense competition. And the entry of Amazon and other international online retailers into the market over the coming years will only put further downward pressure on prices.
In terms of categories, Deloitte found that the convenience and time-savings of catered food beat out supermarkets.
Spending on catered food grew by 3.3 per cent over the year to June 2017 in real terms, compared to just 1.2 per cent real spending growth for supermarkets.
Spending on household goods outpaced all other non-food retail categories in the year to June 2017, with 5.8 per cent real turnover growth, while real turnover growth for department stores was weak over the past year at 1.3 per cent.